Bright prospects in the financial advisory industry means terrific growth potential for independent registered investment advisory firms positioned to capitalize on the positive trends. But being properly positioned is another matter. According to a recent study by Pershing Advisor Solutions LLC and Moss Adams LLP called Fast Forward: The Advisor of the Future, advisors will be evaluated on "three C's"-change, capacity and culture-that will define their future ability to compete.

The first aspect calls for devising bold organizational changes. The typical RIA will undergo a rapid transformation and the average RIA firm is expected to triple in size over the next five years, the report says. To boost revenue and owner income, RIAs need to make more thoughtful hiring decisions beyond the goal of simply hiring more advisors. Advisory firm owners also need to create more sophisticated organizational structures that include support functions, dedicated management positions and specialists such as financial planning experts and tax professionals. Developing employees who can drive cultural change and enter leadership roles will also play an integral role in helping to boost retention, extend the span of control and ensure succession when an owner decides to make a transition.

    The second component entails creating and maintaining capacity. The key to fast growth is having professionals who can take full advantage of opportunities when they are available. Firms that have high productivity but no free capacity have struggled to grow. In fact, firms that had the highest productivity in 2003 had a difficult time capturing the opportunity the market presented in 2004. At the same time, firms that grew very fast had excess capacity and lower productivity levels. A firm that has aspirations to grow quickly has to maintain the capacity to do so at all times and be ready to capture the opportunity when it presents itself.  Excess capacity is critical to capturing the "Big Years"-periods of dramatic opportunities created by either changing behavior of consumers or great equity markets. 

    The study's third major point, fostering a culture that supports strategy, aims to avoid the "cultural vacuum" that often is a byproduct of rapid growth and which hinders the ability to adapt to new organizational goals. The solution, says the report, is that firms need to manage cultural change by leading by example, defining success appropriately, articulating and communicating a set of shared values, and accepting and embracing new employees.  Founders will have to let go of some of their traditional responsibilities while finding ways to keep a client-focused culture that maintains an entrepreneurial drive and provides people with ample opportunity to reap individual reward.

    Jersey City, N.J.-based Pershing Advisor Solutions, a subsidiary of The Bank of New York Mellon Corporation, and Seattle-based Moss Adams yesterday hosted the first of 13 regional consultative-oriented workshops that will leverage the Fast Forward study and the partners' prior study entitled Uncharted Waters: Navigating the Forces Shaping the Advisory Industry. These interactive workshops-the first was held in Washington, D.C.-will highlight key findings from both studies and give participants the opportunity to create a personalized scorecard, with analysis of where their firms rank compared with their peers across the three focus areas of culture, change and capacity. Participants will also explore strategies and tactics to successfully position their firms for the anticipated growth of the industry over the next five years.

    Information on workshop agendas, registration details and workshop locations can be found at The full version of Fast Forward: The Advisor of the Future report can be found at [email protected].